While precious metal prices have remained buoyant since the start of 2016, miners are leaving no stone unturned in their mission to prune their balance sheets wherever possible because investors have grown wary of companies with too much financial leverage.
Reducing financial leverage
Coeur Mining (CDE) repaid $109.3 million of its debt in 3Q16. After this, the company’s interest expenses fell 26% quarter-over-quarter and 35% YoY (year-over-year). In the past 12 months, Coeur Mining’s debt has fallen more than 25%, or ~$400 million. Coeur Mining’s net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio was 3.6x at the end of 3Q15. It fell to 0.9x at the end of 3Q16—a 75% improvement.
The company announced a $200 million at-the-market stock offering in September 2016. By October 25, 2016, it had sold 7.6 million shares, with net proceeds of ~$90 million. The company intends to use these proceeds to reduce its debt further.
Hecla Mining (HL) had a net debt of $323 million at the end of 3Q16, as compared to $358 million at the end of previous quarter. Most of its debt is long-dated, with notes coming due in 2021. Fiscal 3Q16 was the fourth consecutive quarter of improving debt metrics for the company. Its net debt-to-EBITDA at the end of 3Q16 was 1.4x, as compared to 3.1x at the end of 2015.
As of September 30, Tahoe Resources (TAHO) had cash and equivalents of $142 million, $54 million in debt and leases, leading to a net cash of $88 million.
First Majestic Silver (AG) ended 3Q16 with $122.5 million in cash and cash equivalents and $35 million in long-term debt. Along with cash generation, the company’s liquidity appears to be sufficient to fund internal growth projects as well as debt repayments.
Pan American Silver (PAAS) ended 3Q16 with $245 million in cash and $47 million in debt, with the cash balance rising $41 million sequentially.
Next, we’ll look at silver miners’ (SIL) liquidity profiles and see what we can learn from them.